A strong strategic financial management plan can set your business up for success from day one. Not many entrepreneurs have that plan. In fact, 29% of small business failures happen because of poor cash flow management. With so many business failures due to lack of financial oversight, how can you prepare yourself and your business? Keep reading to learn the top 5 tips to create a plan for your company's finances.
Set Clear Financial Goals
If you want to have a successful business, you need to set up your financial goals. These goals will give everyone on your team something to shoot for. Good financial goals are realistic and will help you project when you can add to your sales team, invest in R&D, or up your marketing budget. Your financial goals also tell you what resources are required to meet those goals. You'll want to know what the major milestones are for your company. It helps to list out the specific tasks that will help you reach those milestones. In this phase, you'll want to know how much investment capital will be required to reach those milestones.
Develop Your Tracking System
When you're first starting out, your startup won't have that many cash inflows and outflows. It's the perfect time to create a financial tracking system. Many entrepreneurs only focus on how much money is coming in, not how much is going out. That's where businesses get into trouble. You can set up a system that you can easily scale up to track your revenue, expenses, and project your cash flow for the next few months. You'll want to check your cash flow reports daily during the early stages of the business. When you track your spending, categorize your expenses by department. You'll want to see if the distribution of expenses makes sense for your business.
Stay Out of Tax Trouble
Most startups don't have taxable income for the first few years of their business. Even though there's not a tax liability, you may be missing out on certain write-offs. For example, your business might not have the proper corporate structure, or you're not writing off business purchases properly. That's why it is critical to hire a tax professional who understands the nuances the tax code. They can help guide you with certain business decisions to help limit your tax liability. The thing to remember is that your taxes are a year-long strategy, not something to visit once a year. Every business decision will have a tax implication, so it's best to know what those impacts are before you make them.
Watch Your Spending
Strategic financial management for spending can save your company when times are good. It's common for businesses to overspend and add to fixed costs when revenue is up. That's a mistake that can force startups out of business. Your job is to question every single expense and do a cost-benefit analysis. That will indicate whether the expense is worth it or not.
The final tip for your financial plan is to have accountability measures in place. For example, if you don't hit your revenue targets, how will you be held accountable? As a founder, you need to hold yourself and your staff accountable. That goes for both expenses and revenue. Otherwise, your company can overspend and your venture is at risk.
Strategic Financial Management Can Save Your Startup
A strong financial plan can help your business be successful. With a great tracking system and careful oversight, your startup can avoid cash flow issues. If you have questions about getting investment for your startup, contact any one of our team members today.